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AdvanSix Announces Third Quarter 2021 Financial Results

Business Wire - Fri Oct 29, 2021

AdvanSix (NYSE:ASIX) today announced its financial results for the third quarter ending September 30, 2021. Overall, the Company generated robust sales, earnings and cash flow in the quarter reflecting strong execution amid improving end market demand and tight industry supply conditions.

Third Quarter 2021 Summary

  • Sales up approximately 58% versus prior year driven by 28% favorable impact of market-based pricing, 22% higher raw material pass-through pricing and 8% higher volume
  • Net Income of $43.9 million, an increase of $44.6 million versus the prior year
  • EBITDA of $75.2 million, an increase of $59.4 million versus the prior year
  • EBITDA Margin of 16.8%, an increase of 1120 bps versus the prior year
  • Cash Flow from Operations of $76.5 million, an increase of $41.0 million versus the prior year
  • Capital Expenditures of $13.0 million, a decrease of $3.0 million versus the prior year
  • Free Cash Flow of $63.5 million, an increase of $43.9 million versus the prior year
  • Announced the initiation of a $0.125 per share quarterly dividend payable November 23, 2021

“We continued to execute well in the third quarter while supporting our customers to successfully navigate the current set of industry dynamics," said Erin Kane, president and CEO of AdvanSix. "Our performance was supported by strong pricing and volume improvement including continued contributions from differentiated products amid favorable end market conditions and tight industry supply. Our earnings results were above the high-end of the outlook we provided at our September 28th Investor Day driven primarily by better-than-expected pricing, net of raw material costs, as well as the timing of ammonium sulfate sales."

Summary third quarter 2021 financial results for the Company are included below:

($ in Thousands, Except Earnings Per Share)

3Q 2021

 

3Q 2020

Sales

$446,495

 

$281,910

Net Income (Loss)

43,942

 

(692)

Diluted Earnings (Loss) Per Share

$1.51

 

($0.02)

EBITDA (1)

75,188

 

15,806

EBITDA Margin % (1)

16.8%

 

5.6%

Cash Flow from Operations

76,488

 

35,533

Free Cash Flow (1)(2)

63,495

 

19,572

(1)

See “Non-GAAP Measures” included in this press release for non-GAAP reconciliations

(2)

Net cash provided by operating activities less capital expenditures

Sales of $446.5 million increased approximately 58% versus the prior year. Raw material pass-through pricing was favorable by 22% following a net cost increase in benzene and propylene (inputs to cumene which is a key feedstock to our products). Market-based pricing was favorable by 28% compared to the prior year driven by higher pricing across each of our product lines. Sales volume in the quarter increased approximately 8% driven primarily by improved end market demand across our ammonium sulfate, nylon and caprolactam product lines.

Sales by product line and approximate percentage of total sales are included below:

($ in Thousands)

3Q 2021

 

3Q 2020

 

Sales

 

% of Total

 

Sales

 

% of Total

Nylon

$

122,110

 

 

27%

 

$

73,555

 

 

26%

Caprolactam

80,265

 

 

18%

 

52,409

 

 

18%

Chemical Intermediates

130,920

 

 

29%

 

94,770

 

 

34%

Ammonium Sulfate

113,200

 

 

26%

 

61,176

 

 

22%

 

$

446,495

 

 

100%

 

$

281,910

 

 

100%

EBITDA of $75.2 million in the quarter increased $59.4 million versus the prior year primarily due to higher market-based pricing, net of increased raw material costs, and the net approximately $20 million favorable impact of planned plant turnarounds year-over-year. 3Q 2021 EBITDA included approximately $2 million favorable impact of additional insurance proceeds related to the 2019 shutdown of cumene supplier Philadelphia Energy Solutions (PES).

Earnings per share of $1.51 increased $1.53 versus the prior year driven primarily by the factors discussed above.

Cash flow from operations of $76.5 million in the quarter increased $41.0 million versus the prior year primarily due to higher net income and the favorable impact of changes in working capital. Capital expenditures of $13.0 million in the quarter decreased $3.0 million versus the prior year reflecting capital process efficiencies and timing of project execution.

Dividend

As announced on September 28, 2021, the company's Board of Directors declared a quarterly cash dividend of $0.125 per share on the company's common stock, payable on November 23, 2021 to stockholders of record as of the close of business on November 9, 2021.

Credit Agreement

On October 27, 2021, the Company completed a refinancing of its existing credit facility by entering into a new 5-year, $500 million revolving credit facility providing increased liquidity and flexibility at lower borrowing costs reflecting strong business performance and more favorable credit market conditions.

Outlook

  • Expect steady North America nylon demand amid favorable end market conditions and tight industry supply
  • Expect robust agricultural industry fundamentals to continue through 2022 planting season
  • Expect strong demand for chemical intermediates to continue; Expect continued balancing of North America acetone supply and demand
  • Expect Capital Expenditures to be approximately $63 million in 2021; Continue to expect $95 to $105 million in 2022 reflecting scope of planned plant turnarounds and timing of project execution
  • Expect pre-tax income impact of planned plant turnarounds to be approximately $30 million in 2021

"The outlook for our business remains favorable. We are building off a strong foundation with leading positions across our key product lines aligned to a diverse and growing set of end uses and applications. Our enhanced capital allocation strategy, including the recent initiation of a quarterly dividend, is creating further shareholder value over the long-term. We've demonstrated our ability to successfully perform through all market conditions and expand our earnings base and are even more excited about the opportunities that lie ahead for AdvanSix,” concluded Kane.

Conference Call Information

AdvanSix will discuss its results during its investor conference call today starting at 9:00 a.m. ET. To participate on the conference call, dial (844) 855-9494 (domestic) or (412) 858-4602 (international) approximately 10 minutes before the 9:00 a.m. ET start, and tell the operator that you are dialing in for AdvanSix’s third quarter 2021 earnings call. The live webcast of the investor call as well as related presentation materials can be accessed at http://investors.advansix.com. Investors can hear a replay of the conference call from 12 noon ET on October 29 until 12 noon ET on November 5 by dialing (877) 344-7529 (domestic) or (412) 317-0088 (international). The access code is 10160663.

About AdvanSix

AdvanSix plays a critical role in global supply chains, innovating and delivering essential products for our customers in a wide variety of end markets and applications that touch people’s lives, such as building and construction, fertilizers, plastics, solvents, packaging, paints, coatings, adhesives and electronics. Our reliable and sustainable supply of quality products emerges from the vertically integrated value chain of our three U.S.-based manufacturing facilities. AdvanSix strives to deliver best-in-class customer experiences and differentiated products in the industries of nylon solutions, chemical intermediates, and plant nutrients, guided by our core values of Safety, Integrity, Accountability and Respect. More information on AdvanSix can be found at http://www.advansix.com.

Forward Looking Statements

This release contains certain statements that may be deemed “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical fact, that address activities, events or developments that our management intends, expects, projects, believes or anticipates will or may occur in the future are forward-looking statements. Forward-looking statements may be identified by words such as "expect," "anticipate," "estimate," “outlook,” "project," "strategy," "intend," "plan," "target," "goal," "may," "will," "should" and "believe" and other variations or similar terminology and expressions. Although we believe forward-looking statements are based upon reasonable assumptions, such statements involve known and unknown risks, uncertainties and other factors, many of which are beyond our control and difficult to predict, which may cause the actual results or performance of the Company to be materially different from any future results or performance expressed or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to: general economic and financial conditions in the U.S. and globally, including the impact of the coronavirus (COVID-19) pandemic and any resurgences; the scope, shape and pace of recovery of the pandemic; the timing of the distribution and efficacy of vaccines or treatments for COVID-19 that are currently available or may be available in the future and related vaccination rates; the severity and transmissibility of newly identified strains of COVID-19; governmental, business and individuals’ actions in response to the pandemic, including our business continuity and cash optimization plans that have been, and may in the future be, implemented; the impact of social and economic restrictions and other containment measures taken to combat virus transmission; the effect on our customers’ demand for our products and our suppliers’ ability to manufacture and deliver our raw materials, including implications of reduced refinery utilization in the U.S.; our ability to sell and provide our goods and services, including as a result of travel and other COVID-19-related restrictions; the ability of our customers to pay for our products; and any closures of our and our customers’ offices and facilities; risks associated with increased phishing, compromised business emails and other cybersecurity attacks and disruptions to our technology infrastructure; risks associated with employees working remotely or operating with a reduced workforce; risks associated with our indebtedness including compliance with financial and restrictive covenants, and our ability to access capital on reasonable terms, at a reasonable cost or at all due to economic conditions resulting from COVID-19 or otherwise; the impact of scheduled turnarounds and significant unplanned downtime and interruptions of production or logistics operations as a result of mechanical issues or other unanticipated events such as fires, severe weather conditions, natural disasters and pandemics; price fluctuations, cost increases and supply of raw materials; our operations and growth projects requiring substantial capital; growth rates and cyclicality of the industries we serve including global changes in supply and demand; failure to develop and commercialize new products or technologies; loss of significant customer relationships; adverse trade and tax policies; extensive environmental, health and safety laws that apply to our operations; hazards associated with chemical manufacturing, storage and transportation; litigation associated with chemical manufacturing and our business operations generally; inability to acquire and integrate businesses, assets, products or technologies; protection of our intellectual property and proprietary information; prolonged work stoppages as a result of labor difficulties or otherwise; cybersecurity, data privacy incidents and disruptions to our technology infrastructure; failure to maintain effective internal controls; our ability to declare and pay quarterly cash dividends and the amounts and timing of any future dividends; our ability to repurchase our common stock and the amount and timing of any future repurchases; disruptions in supply chain, transportation and logistics; potential for uncertainty regarding qualification for tax treatment of our spin-off; fluctuations in our stock price; and changes in laws or regulations applicable to our business. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release. Such forward-looking statements are not guarantees of future performance, and actual results, developments and business decisions may differ from those envisaged by such forward-looking statements. We identify the principal risks and uncertainties that affect our performance in our filings with the Securities and Exchange Commission (SEC), including the risk factors in Part 1, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020, as updated in subsequent reports filed with the SEC.

Non-GAAP Financial Measures

This press release includes certain non-GAAP financial measures intended to supplement, not to act as substitutes for, comparable GAAP measures. Reconciliations of non-GAAP financial measures to GAAP financial measures are provided in this press release. Investors are urged to consider carefully the comparable GAAP measures and the reconciliations to those measures provided. Non-GAAP measures in this press release may be calculated in a way that is not comparable to similarly-titled measures reported by other companies.

AdvanSix Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(Dollars in thousands, except share and per share amounts)

 

 

September 30, 2021

 

December 31, 2020

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

7,239

 

 

 

$

10,606

 

 

Accounts and other receivables – net

170,941

 

 

 

123,554

 

 

Inventories – net

142,911

 

 

 

180,085

 

 

Taxes receivable

337

 

 

 

12,289

 

 

Other current assets

11,654

 

 

 

6,969

 

 

Total current assets

333,082

 

 

 

333,503

 

 

 

 

 

 

Property, plant and equipment – net

759,373

 

 

 

765,469

 

 

Operating lease right-of-use assets

142,931

 

 

 

114,484

 

 

Goodwill

17,592

 

 

 

15,005

 

 

Other assets

37,384

 

 

 

34,946

 

 

Total assets

$

1,290,362

 

 

 

$

1,263,407

 

 

 

 

 

 

LIABILITIES

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

217,993

 

 

 

$

190,227

 

 

Accrued liabilities

48,315

 

 

 

41,152

 

 

Operating lease liabilities – short-term

36,694

 

 

 

29,279

 

 

Deferred income and customer advances

3,138

 

 

 

26,379

 

 

Total current liabilities

306,140

 

 

 

287,037

 

 

 

 

 

 

Deferred income taxes

137,241

 

 

 

125,575

 

 

Operating lease liabilities – long-term

106,773

 

 

 

85,605

 

 

Line of credit – long-term

135,000

 

 

 

275,000

 

 

Postretirement benefit obligations

27,119

 

 

 

39,168

 

 

Other liabilities

11,778

 

 

 

6,899

 

 

Total liabilities

724,051

 

 

 

819,284

 

 

 

 

 

 

STOCKHOLDERS' EQUITY

 

 

 

Common stock, par value $0.01; 200,000,000 shares authorized; 31,738,648 shares issued and 28,124,446 outstanding at September 30, 2021; 31,627,139 shares issued and 28,033,227 outstanding at December 31, 2020

317

 

 

 

316

 

 

Preferred stock, par value $0.01; 50,000,000 shares authorized and 0 shares issued and outstanding at September 30, 2021 and December 31, 2020

 

 

 

 

 

Treasury stock at par (3,614,202 shares at September 30, 2021; 3,593,912 shares at December 31, 2020)

(36

)

 

 

(36

)

 

Additional paid-in capital

192,950

 

 

 

184,732

 

 

Retained earnings

387,932

 

 

 

275,243

 

 

Accumulated other comprehensive loss

(14,852

)

 

 

(16,132

)

 

Total stockholders' equity

566,311

 

 

 

444,123

 

 

Total liabilities and stockholders' equity

$

1,290,362

 

 

 

$

1,263,407

 

 

AdvanSix Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

(Dollars in thousands, except share and per share amounts)

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

2021

 

2020

 

2021

 

2020

Sales

$

446,495

 

 

$

281,910

 

 

 

$

1,260,561

 

 

$

817,644

 

 

 

 

 

 

 

 

 

Costs, expenses and other:

 

 

 

 

 

 

 

Costs of goods sold

366,180

 

 

265,758

 

 

 

1,040,965

 

 

736,504

 

Selling, general and administrative expenses

21,121

 

 

16,177

 

 

 

62,112

 

 

50,827

 

Interest expense, net

1,174

 

 

1,981

 

 

 

4,096

 

 

5,827

 

Other non-operating expense (income), net

331

 

 

(334

)

 

 

349

 

 

216

 

Total costs, expenses and other

388,806

 

 

283,582

 

 

 

1,107,522

 

 

793,374

 

 

 

 

 

 

 

 

 

Income (loss) before taxes

57,689

 

 

(1,672

)

 

 

153,039

 

 

24,270

 

Income tax expense (benefit)

13,747

 

 

(980

)

 

 

36,835

 

 

4,957

 

Net income (loss)

$

43,942

 

 

$

(692

)

 

 

$

116,204

 

 

$

19,313

 

 

 

 

 

 

 

 

 

Earnings (loss) per common share

 

 

 

 

 

 

 

Basic

$

1.56

 

 

$

(0.02

)

 

 

$

4.13

 

 

$

0.69

 

Diluted

$

1.51

 

 

$

(0.02

)

 

 

$

4.02

 

 

$

0.69

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

 

 

 

 

 

Basic

28,182,810

 

 

28,079,937

 

 

 

28,136,511

 

 

28,037,651

 

Diluted

29,100,276

 

 

28,079,937

 

 

 

28,920,832

 

 

28,092,712

 

AdvanSix Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(Dollars in thousands)

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

2021

 

2020

 

2021

 

2020

Cash flows from operating activities:

 

 

 

 

 

 

 

Net income

$

43,942

 

 

 

$

(692

)

 

 

$

116,204

 

 

 

$

19,313

 

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

16,325

 

 

 

15,497

 

 

 

49,058

 

 

 

45,061

 

 

Loss on disposal of assets

409

 

 

 

95

 

 

 

842

 

 

 

143

 

 

Deferred income taxes

3,423

 

 

 

1,389

 

 

 

11,235

 

 

 

11,895

 

 

Stock-based compensation

2,499

 

 

 

603

 

 

 

8,606

 

 

 

3,503

 

 

Accretion of deferred financing fees

142

 

 

 

141

 

 

 

424

 

 

 

412

 

 

Changes in assets and liabilities, net of business acquisitions:

 

 

 

 

 

 

 

Accounts and other receivables

(5,575

)

 

 

(22,385

)

 

 

(46,549

)

 

 

7,445

 

 

Inventories

(2,807

)

 

 

9,851

 

 

 

37,885

 

 

 

(2,163

)

 

Taxes receivable

26

 

 

 

(3,634

)

 

 

11,952

 

 

 

(11,760

)

 

Accounts payable

20,226

 

 

 

31,285

 

 

 

27,047

 

 

 

(9,939

)

 

Accrued liabilities

1,843

 

 

 

1,840

 

 

 

6,418

 

 

 

7,776

 

 

Deferred income and customer advances

188

 

 

 

913

 

 

 

(23,241

)

 

 

(13,520

)

 

Other assets and liabilities

(4,153

)

 

 

630

 

 

 

(14,358

)

 

 

5,920

 

 

Net cash provided by operating activities

76,488

 

 

 

35,533

 

 

 

185,523

 

 

 

64,086

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Expenditures for property, plant and equipment

(12,993

)

 

 

(15,961

)

 

 

(37,471

)

 

 

(67,563

)

 

Acquisition of business

 

 

 

 

 

 

(9,523

)

 

 

 

 

Other investing activities

(493

)

 

 

(373

)

 

 

(975

)

 

 

(898

)

 

Net cash used for investing activities

(13,486

)

 

 

(16,334

)

 

 

(47,969

)

 

 

(68,461

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Borrowings from line of credit

29,000

 

 

 

49,000

 

 

 

133,500

 

 

 

268,500

 

 

Payments of line of credit

(89,000

)

 

 

(124,000

)

 

 

(273,500

)

 

 

(252,500

)

 

Payment of line of credit facility fees

 

 

 

 

 

 

 

 

 

(425

)

 

Principal payments of finance leases

(170

)

 

 

(176

)

 

 

(534

)

 

 

(534

)

 

Purchase of treasury stock

 

 

 

 

 

 

(589

)

 

 

(1,032

)

 

Issuance of common stock

156

 

 

 

 

 

 

202

 

 

 

2

 

 

Net cash provided by (used for) financing activities

(60,014

)

 

 

(75,176

)

 

 

(140,921

)

 

 

14,011

 

 

 

 

 

 

 

 

 

 

Net change in cash and cash equivalents

2,988

 

 

 

(55,977

)

 

 

(3,367

)

 

 

9,636

 

 

Cash and cash equivalents at beginning of period

4,251

 

 

 

72,663

 

 

 

10,606

 

 

 

7,050

 

 

Cash and cash equivalents at the end of period

$

7,239

 

 

 

$

16,686

 

 

 

$

7,239

 

 

 

$

16,686

 

 

 

 

 

 

 

 

 

 

Supplemental non-cash investing activities:

 

 

 

 

 

 

 

Capital expenditures included in accounts payable

 

 

 

 

$

6,783

 

 

 

$

5,802

 

 

AdvanSix Inc.

Non-GAAP Measures

(Dollars in thousands)

Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

2021

 

2020

 

2021

 

2020

Net cash provided by operating activities

$

76,488

 

 

 

$

35,533

 

 

 

$

185,523

 

 

 

$

64,086

 

 

Expenditures for property, plant and equipment

(12,993

)

 

 

(15,961

)

 

 

(37,471

)

 

 

(67,563

)

 

Free cash flow (1)

$

63,495

 

 

 

$

19,572

 

 

 

$

148,052

 

 

 

$

(3,477

)

 

 

 

 

 

 

 

 

 

(1) Free cash flow is a non-GAAP measure defined as Net cash provided by operating activities less Expenditures for property, plant and equipment

The Company believes that this metric is useful to investors and management as a measure to evaluate our ability to generate cash flow from business operations and the impact that this cash flow has on our liquidity.

Reconciliation of Net Income to EBITDA

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

2021

2020

 

2021

2020

Net income (loss)

$

43,942

 

 

$

(692

)

 

 

$

116,204

 

 

$

19,313

 

Interest expense, net

1,174

 

 

1,981

 

 

 

4,096

 

 

5,827

 

Income tax expense (benefit)

13,747

 

 

(980

)

 

 

36,835

 

 

4,957

 

Depreciation and amortization

16,325

 

 

15,497

 

 

 

49,058

 

 

45,061

 

EBITDA (2)

$

75,188

 

 

$

15,806

 

 

 

$

206,193

 

 

$

75,158

 

 

 

 

 

 

 

 

 

Sales

$

446,495

 

 

$

281,910

 

 

 

$

1,260,561

 

 

$

817,644

 

 

 

 

 

 

 

 

 

EBITDA margin (3)

16.8

%

 

5.6

%

 

16.4

%

 

9.2

%

 

 

 

 

 

 

 

 

(2) EBITDA is a non-GAAP measure defined as Net Income before Interest, Income Taxes, Depreciation and Amortization

(3) EBITDA margin is defined as EBITDA divided by Sales

The Company believes the non-GAAP financial measures presented in this release provide meaningful supplemental information as they are used by the Company’s management to evaluate the Company’s operating performance, enhance a reader’s understanding of the financial performance of the Company, and facilitate a better comparison among fiscal periods and performance relative to its competitors, as these non-GAAP measures exclude items that are not considered core to the Company’s operations.

AdvanSix Inc.

Appendix

(Pre-tax income impact, Dollars in millions)

Planned Plant Turnaround Schedule (4)

 

 

1Q

2Q

3Q

4Q

FY

2017

~$10

~$4

~$20

~$34

2018

~$2

~$10

~$30

~$42

2019

~$5

~$5

~$25

~$35

2020

~$2

~$7

~$20

~$2

~$31

2021E

~$3

~$8

~$19

~$30

(4) Primarily reflects the impact of fixed cost absorption, maintenance expense, and the purchase of feedstocks which are normally manufactured by the Company.